Correlation Between Core Assets and Grid Metals

Can any of the company-specific risk be diversified away by investing in both Core Assets and Grid Metals at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Core Assets and Grid Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Core Assets Corp and Grid Metals Corp, you can compare the effects of market volatilities on Core Assets and Grid Metals and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Core Assets with a short position of Grid Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Core Assets and Grid Metals.

Diversification Opportunities for Core Assets and Grid Metals

0.02

Correlation Coefficient

Core Assets  Grid Metals

Significant diversification

The 3 months correlation between Core and Grid is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Core Assets Corp and Grid Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grid Metals Corp and Core Assets is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Core Assets Corp are associated (or correlated) with Grid Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grid Metals Corp has no effect on the direction of Core Assets i.e., Core Assets and Grid Metals go up and down completely randomly.

Pair Corralation between Core Assets and Grid Metals

Assuming the 90 days horizon Core Assets Corp is expected to under-perform the Grid Metals. In addition to that, Core Assets is 1.02 times more volatile than Grid Metals Corp. It trades about -0.09 of its total potential returns per unit of risk. Grid Metals Corp is currently generating about -0.02 per unit of volatility. If you would invest  2.97  in Grid Metals Corp on September 3, 2024 and sell it today you would lose (0.69) from holding Grid Metals Corp or give up 23.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Core Assets Corp  vs.  Grid Metals Corp

Core Assets Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Core Assets Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Grid Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grid Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Core Assets and Grid Metals

The main advantage of trading using opposite Core Assets and Grid Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Core Assets position performs unexpectedly, Grid Metals can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Grid Metals will offset losses from the drop in Grid Metals' long position.

The idea behind Core Assets Corp and Grid Metals Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.